Year: 2012

1 euro investment returns 300-400 euro to the exchequer

Peter Cox advocates greater public investment in the heritage sector in this Irish Times article.  There may well be a strong case for extra investment in this sector. Still,  it would be good to see the rigorous analysis behind this remarkable rate of return.  It would also be good to see the cited Quantum Research study that finds that

grants made over the last 10 years have contributed at least two-fold and possibly four-fold to the exchequer in income tax, VAT, employment and buying local and Irish goods

Authorities refused to publish house price warnings in 2004

Anthony Murphy, now at the Dallas Fed, is a renowned Irish econometrician with a strong research interest in housing markets. Back in 2004 he was commissioned by the National Competitiveness Council to study the competitiveness implications of the housing boom.

The first paragraph of his report read: “Ireland’s booming housing market has attracted and continues to attract a considerable amount of attention, both domestically and internationally. Irish house prices are extremely high by historic and international standards, both in absolute terms and relative to incomes. The strength and duration of the house price boom is unique. Many other countries and regions have experienced large house prices booms. However, at least in the 1980’s and early 1990’s, most of these booms have ended in a house price bust.”

The report, which is here, was obviously written in very judicious language but was highly critical of the fiscal contribution to the boom. (His demolition in Section 3.5 of many of the research papers written on the boom is also well worth reading). The NCC declined to publish it. Though I have a good deal of respect for Forfás and the NCC in general, I am forced to ask: how much attention might it have received, and might it have made any difference, if it had been published?

Happy 2012?

Charles Wyplosz writes on what can be done in 2012 to fix the eurozone crisis in this vox article.

Richard Tol leaves the ESRI

And he’s not gone quietly. Richard is leaving to take up a position at the University of Sussex, and I wish him well. Moving country when one has young kids is no joke. One doesn’t do these things lightly. Richard has made some important points in relation to Irish public policy on Twitter, in relation to the ESRI and the Irish economy in the Irish Times, and a bit of both today on the News at One (link is to .mp3, about 3:40 in). These are worth highlighting for three reasons.

1. Richard has criticized the independence of the ESRI with respect to its funding sources and the conclusions of its research, especially in areas away from their sometimes trenchant criticism of the Department of Finance. This is a serious matter which deserves some comment by the ESRI in my opinion.

2. Richard now joins 6 or 7 senior academic economists, including world leaders in their fields like Profs Kevin O’Rourke and Liam Delaney, leaving Ireland for more or less the same reason–they see a decade of austerity ahead for Ireland, they feel Irish academia has less to offer them as a result, and because they are research active and employable elsewhere, they are going. This is a problem for Irish academic economics going forward.

3. Most importantly, I think, Richard is a dissenter in many areas of Irish public policy and public life. He has his opinions which, while we don’t have to agree with them all (I certainly don’t), should be respected and given an airing. The fact that he didn’t find a home to adequately voice these opinions is a shame, and something I think we are poorer for as a result.

Regulatory Reform and Economic Performance

The Memorandum of Understanding between the Irish government and the troika of EU, ECB and IMF was agreed in December 2010. It contained commitments to policy changes designed to improve competitiveness through acting on professional service costs, the structure of the energy sector and similar matters. Several commentators on this site have been arguing recently that the new government is delivering austerity without reform. Here’s an interesting recent article from the Economic Journal and an earlier version on open access if you cannot get into the ucd online library.

Guglielmo Barone and Federico Cingano conclude that OECD countries which have gone furthest in tackling anti-competitive practices have enjoyed enhanced performance in industry sectors which are consumers of the products and services of the formerly rent-absorbing firms and professions.

Their conclusions are supportive of the MoU reform agenda, and of the recommendations in the report of the State Assets Review Group on vertical separation (unbundling) in the energy sector.

Happy New Year to you and yours.